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40 BizEd JANUARY | FEBRUARY 2015 collegiality. cooperation. freedom. Innovation. All are benefits that business schools can expect under a well-designed responsibility-centered management financial model, says Idalene "Idie" Kesner, dean and Frank P. Popoff Chair of Strategic Management at Indiana University's Kelley School of Business in Bloomington. "RCM opens up opportunities for us as deans. It gives us more authority and responsibility to control our own fate, in terms of how we accumulate resourc- es, make investments, and plan for the future of the school," says Kesner. "It's very transparent and predictable, so I know what funds I will have each year. I cannot imagine operating in an environ- ment that is not RCM-based." IU adopted RCM in 1990 and has been perfecting its formula ever since. Under its current RCM model, each college receives both an allocation of the university's tuition revenues and an appropriation of the university's state funding. Both amounts are determined by the college's "market share" of the total number of credit hours taught at the university in the previous year. Each college retains control of revenues generated by its own master's level programs—and, in Kelley's case, by its executive education courses. Once all revenues are dispersed, each college pays the university an assessment fee, determined by factors such as number of credit hours taught, number of ten- ure-track faculty, and square footage of physical facilities. The university uses this fee to pay for utilities and mainte- nance, as well as common services such as the library, tech support, and enroll- ment management. In addition to private donations, the only other unpredictable revenue sourc- es are those distributed by IU's special Provost's Fund. IU's colleges and de- partments submit proposals for support from this fund to develop innovative new programs. Even after 25 years, IU still is tweak- ing its RCM formula. Each college par- ticipates in discussions of the pros and cons of any proposed change. IU admin- istrators now are debating whether to switch from a formula based on market share to one based on total credit hours taught. Market share is a relative num- ber, so that "if one unit's market share goes down by 2 percent, another picks up that 2 percent," Kesner explains. If the university used credit hours as an absolute number, "we could predict our income even more accurately, because we know how many hours we teach." Each year, the transparency of RCM forces IU's deans to examine the num- bers carefully. It becomes clear which areas are underperforming, so deans can make more informed decisions about whether a course or program should be expanded, discontinued, or subsidized if it contributes to the college's mission. Such transparency also allows deans to understand where their college stands in the system. "This creates a collegial and cross-disciplinary en- Reaping Rewards from RCM THIS BUSINESS SCHOOL HAS OPERATED UNDER THE SAME FINANCIAL MODEL FOR NEARLY 25 YEARS, AND ITS CURRENT DEAN WOULDN'T HAVE IT ANY OTHER WAY. change management " RCM creates a collegial and cross-disciplinary environment, where we are encouraged to work with other deans." —IDALENE KESNER, INDIANA UNIVERSITY PHOTOGRAPH BY INDIANA UNIVERSITY